Futures contract

Also found in: Dictionary, Thesaurus, Medical, Legal, Encyclopedia, Wikipedia.
Related to Futures contract: futures market

Futures contract

A legally binding agreement to buy or sell a commodity or financial instrument in a designated future month at a price agreed upon at the initiation of the contract by the buyer and seller. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. A futures contract differs from an option in that an option gives one of the counterparties a right and the other an obligation to buy or sell, while a futures contract is the represents an obligation to both counterparties, one to deliver and the other to accept delivery. A future is part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment.

Futures Contract

An agreement to buy or sell an asset at a certain date at a certain price. That is, Investor A may make a contract with Farmer B in which A agrees to buy a certain number of bushels of B's corn at $15 per bushel. This contract must be honored whether the price of corn goes to $1 or $100 per bushel. Futures contracts can help reduce volatility in certain markets, but they contain the risks inherent to all speculative investing. These contracts may be sold on the secondary market, but the person holding the contract at its end must take delivery of the underlying asset. Futures contract are standard instruments; that is, unlike forward contracts, their provisions are standardized. As such, they may be traded on an exchange.

futures contract

An agreement to take (that is, by the buyer) or make (that is, by the seller) delivery of a specific commodity on a particular date. The commodities and contracts are standardized in order that an active resale market will exist. Futures contracts are available for a variety of items including grains, metals, and foreign currencies. See also Section 1256 contracts.

Futures contract.

Futures contracts, when they trade on regulated futures exchanges, obligate you to buy or sell a specified quantity of the underlying product for a specific price on a specific date.

The underlying product could be a commodity, stock index, security, or currency.

Because all the terms of a listed futures contract are structured by the exchange, you can offset your contract and get out of your obligation by buying or selling an opposing contract before the settlement date.

Futures contracts provide some investors, called hedgers, a measure of protection from price volatility on the open market.

For example, wine manufacturers are protected when a bad crop pushes grape prices up on the spot market if they hold a futures contract to buy the grapes at a lower price. Grape growers are also protected if prices drop dramatically -- if, for example, there's a surplus caused by a bumper crop -- provided they have a contract to sell at a higher price.

Unlike hedgers, speculators use futures contracts to seek profits on price changes. For example, speculators can make (or lose) money, no matter what happens to the grapes, depending on what they paid for the futures contract and what they must pay to offset it.

References in periodicals archive ?
The gold futures contract, which will be physically settled, with delivery in Singapore, complements the exchange s mini gold contract.
The launch of this new iron ore futures contract will build on the company's global suite of iron ore futures and options products, including the Iron Ore 62% Fe CFR China futures contracts, which serve the growing markets in Asia and Europe.
While the MSCI Futures contracts launched last week were designed for an institutional investor base, these two products of Mini Indian Rupee Futures primarily have a retail focus.
I would like to congratulate Dalian Commodity Exchange for the launch of their polypropylene futures contract," added Anderson.
I would like to congratulate DGCX on the launch of their polypropylene futures contract and I look forward to the synergies between the two contracts bringing substantial benefits to the plastics market," added Zhengqiang.
The new DGCX Polypropylene plastic futures contracts will create a transparent market and new pricing benchmark for Mena region.
On Tuesday, 4,467 WTI futures contracts were traded.
The new swap futures contracts and their commodity codes will be: Argus biodiesel RME Barges Rotterdam (1A); Brent CFD (Platts) vs.
At the close of trading on 2nd December 2008, the DME Oman Crude Oil Futures Contract had traded a total of 500, 495 contracts, equivalent to 500.
The revised Indian rupee futures contract will be available for trading from Nov.
The DME Brent Crude Oil Financial Contract will be cash-settled against ICE's Brent Crude Futures Contracts, while the DME Oman Crude Oil Financial Contract will be cash-settled against the DME Oman Crude Oil Futures Contract.
A"We are confident that these new contracts will prove as successful as our flagship physically delivered Oman crude oil futures contract and greatly add to overall liquidity and price transparency.